What Is Conversion Rate?

Posted on: 19 Jun, 2018

What is conversion rate? In the world of business, it’s all about sales which must mean it’s all about conversion too. From converting a potential lead to a customer and an ad view into a sale, understanding conversion and making it happen is an essential.

One of the best ways to measure the success of a product, service marketing approach or just about anything else is by using conversion rate.

By understanding conversion rate it becomes possible to implement new marketing techniques while optimising these methods to make the most of your marketing spend.

How? Read on…

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Conversion Rate Meaning

The term “conversion rate” can mean a number of things to different people. However, according to the Nielsen Norman Group, a conversion rate is the percentage of individual who take a desired action.

The most common iteration of a conversion rate is a percentage of website visitors who end up purchasing a product or service from the website.

At other times, a conversion doesn’t need to occur when a website visitor makes a purchase. There are other Key Performance Indicator (KPI) opportunities that a business can use to measure other conversion rate forms.

Types of Conversion

While buying something off of a website or digital storefront falls under this category, so does signing up for a service or entering in an email address to join a mailing list, becoming a registered user, downloading trial software, upgrading to a new service level, downloading an application on a mobile device or really anything else.

In other words, a conversion rate meaning is determined by the business. A company identifies a set outcome goal (such as making sales or increasing a social media following). Ever user who interacts with the campaign becomes a visitor and every one of these visitors who obtains the final goal set out by the company becomes a conversion.

Conversion Rate Calculating

Calculating a business operation’s conversion rate is rather straight forward. First, the business, marketing agency or other entity needs to determine the number of unique visitors (such as the number of unique clicks on an advertisement or the number of hits it received on a website).

It also needs to identify the number of successful “conversions” it had, such as the number of sales, the number of individuals who signed up for an email newsletter or whatever else the end goal for the marketing plan was. Now, the company needs to divide the number of conversions by the total number of interactions.

Examples of Conversion

For example, if a company netted 25 sales from 1,000 unique visitors on the site, the math formula for this would be 25 / 1,000. This equals 0.025, or 2.5%. This means the company saw a 2.5% conversion rate on the number of unique visitors and, if the trend continues, can expect to continue seeing 2.5% of all visitors end up as conversions in the future (unless adjustments to the marketing approach are implemented).

In many cases, a business will monitor a number of different conversion rates within a single marketing campaign, as while it may have a singularly desired end goal, there may be subsequent actions and conversions it wants to monitor as well.

One example is while the desired end goal is to make a sale, a website visitor may end up signing up for an email newsletter and become a lead. While they did not convert into a sale, the visitor did convert into a lead.

Conversion Rate Optimisation

The drive of any business is to reach its desired goals with the highest conversion rate possible. While a 100 percent conversion rate is not likely, there are ways to boost the current conversion rate, through a process known as conversation rate optimisation (conversion rate optimization, CRO). This is the method of which the desired outcome is increased.

There are a number of different CRO methods designed to help improve the conversion rate eCommerce websites experience. In many instances, tips and tools used to improve the conversion rate will also boost other performance features on a website, such as search engine optimization and bounce rate.

One method for boosting the CRO is to reduce website load time. The longer it takes a website to load the higher the likelihood of a visitor backing out of the site. Website load time also impacts a site’s search engine optimization as search engines such as Google take into account load time when determining site ranks.

A reduction in load time will also help improve the bounce rate (bounce rate is the percentage of visitors who make an actionable click on the site instead of arriving on the site and “bouncing” away).

Content and Conversion

Another way to boost CRO is to increase the level of content. By adding more blog posts to a site during a given week, it’s possible to increase website exposure. This promotes the business further and allows visitors to increase interaction with the business. These posts also help boost the number of times a search engine crawls the site, which helps with search engine optimization as well.

A few other ways a website, business owner or marketing agency can boost the conversion rate is to add social sharing options to a website (this shares the content with friends and family members, who are more likely to take a product recommendation from someone they know). This positions important content for a website above the fold (this is an old newspaper term meaning the important information is present without the need to scroll down a website page) and by focusing on a single topic when creating advertisement material.

By implementing these different tips, it’s possible for a website, business owner or marketer to improve the company’s overall conversion rate.

Conversion Rate Formula

While the standard conversion rate is the number of conversions divided by the number of unique interactions, there are other conversion rate forumula data a business needs to take advantage of and understand. Some services, such as Google AdWords, help by automatically providing this information within a user’s dashboard. However, there may be times when the business wants to know how to perform the formula on their own.

Outside of the standard conversion rate formula, the cost per conversion is important to know as well. This builds slightly on the standard formula (conversions divided by unique visitors). The cost per conversion begins with identifying the cost per click. This is the amount of money a business spends bringing in a visitor to the website. Often, this is done by a CPC advertisement.

Conversion Cost Explained

Every time someone clicks on the advertisement the business is charged an established fee. Sometimes this fee will vary based on the current rate for which Google (or other advertise services) charge based on the keyword. To begin the formula, it’s necessary to identify the current cost per click.

From here, the user needs to multiply the cost per click by the number of clicks. If, for example, the cost per click is £0.50 and 1,000 users clicked on the advertisement, it cost the company a total of £500 to generate the conversions. If the business saw a total of 25 conversions, it’s then necessary to divide 25 by 500, which is 20 (or £20). In this instance, it costs the company £20 per conversion.

Conversion in AdWords

Google AdWords provides users with a number of different conversion rates features. This way, it is possible to monitor a number performance features within the website. However, the best way to make sure Google AdWords is monitoring the desired conversion is to program it to do so.

In order to program AdWords into monitoring the desired conversion rate, there are two configuration setups available, depending on whether a user is logged onto the Classic AdWords or the New AdWords. To begin, the user needs to log onto their AdWords account and then choose “Tag Manager.”

This begins a new AdWords tag. From there, the user needs to select “New Tag,” followed by “Tag Configuration” and finally “AdWords Conversion Tracking.” This practice remains the same between both Classic and New. However, it’s from this point where the creation of a new conversion rate monitoring practice changes.

In the Classic AdWords setup, a user needs to return to their AdWords account and choose “Tools,” followed by “Conversions” and then “Conversion Actions.” Once here, they need to select the name of the conversion they want to use. These are located in the “Name” column. From there, they can find the conversion values. They can record the information at this point.

Your AdWords Account

When using the New AdWords setup, a user will need to log onto their AdWords account, select “Tools,” followed by “Billing” and then “Setup.” They then needs to choose “Measurement: Conversions,” which will load the Conversion Actions table.

The user then needs to select the conversion from the “Name” column and then click “Tag Setup.” They will then use the “Google Tag Manager” card and copy over the Conversion ID and Conversion Label.

From here, the process is the same for both New and Classic AdWord versions. Within the Tag Manager, they will need to input the recorded Conversion ID and Conversion Labe values. With this information in place, they can choose a desired “trigger.”

This will record specific actions performed when a visitor interacts with a generated ad or how they interact with the website.

Once all of this has been finished the user just needs to choose “Save” within the tag setup field. They can, should they choose, select the “Preview” mode to look over the new changes and make sure everything looks good. If everything works, they can then choose “Publish” to make the content go live.

Summary: The Importance of Conversion

Conversion rate is one of the most important pieves of analytical data a business can use to determine how well it’s doing and whether or not outreach methods are working or falling flat.

By understanding a conversion rate, it becomes that much easier to identify ways to improve what the business does. From conversion rate optimization to taking advantage of Google AdWords, there’s a considerable amount of knowledge any marketing professional or business owner can take from the conversion rate statistic.

What is conversion rate? In the world of business, it's all about sales which must mean it's all conversion too. From converting a potential lead to a customer and an ad view into a sale, understanding conversion and making it happen is an essential.